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"I feel very great about how the year is going," with Honest Tea and Honest Kids lines both up double-digits in every key package and channel, and co likely to get further lift from rollout of mulitserve organic lemonade and limeade line beyond Whole Foods, she said in conversation on Mon.
As recently noted, brand recently stepped up marketing activation on honesty theme, moving beyond stunts like charting whereabouts of tea bottles left unattended in public places to devising videos that affectionately show real consumers' efforts to be more honest in their daily lives, as with Brooklyn mom who's dropping white lie she tells her kids about ice cream truck being out of stock (BBI, Apr 29). Rather than representing new direction, effort "builds on what the brand is all about," Mathur said, but seeks to move from product focus to more emotionally resonant one.
As for sports drink, which Honest Tea execs were said to have privately previewed for some key retailers at Natural Products Expo West in Mar, Ami only would confirm effort to reach out to retailers, saying it's too early to tell where project will go. But entry by now may have crept out into Whole Foods store or 2 near co's Bethesda, Md, hq and could get green light for formal launch there as early as next month. It's intriguing move, insofar as Coke's sports drink, Powerade, has stayed silent on organic entry even as Pepsi's Gatorade has taken steps toward launch. Of course, organic issue aside, Gatorade and Powerade essentially have been non-players within burgeoning natural-foods realm on account of artificial ingredients in their core brands. So there may be opportunity for brand with deep organic cred like Honest, even tho forays into other adjacencies like yerba mate, kombucha and cacao didn't pan out in past.
Among other initiatives, cutover of PET-bottle tea line - the one that goes on Coke trucks - to Fair Trade sugar should hit shelves in a month or so. Tea line also is expanding range of multiserve packs, with 59-oz tea bottle now garnering full national distribution within Coke bottling system. A glass-bottle, multiserve lemonade brand, devised as a Whole Foods exclusive when longtime supplier Santa Cruz Organic dithered on moving to organic Fair Trade sugar, this year has moved beyond Whole Foods, going thru Coke warehouse system alongside Honest Kids line rather than thru bottlers. "We won't actively push it," Ami said, but lots of requests have been coming in for it. Whole Foods, meanwhile, gets new Ginger flavor of the lemonade within that so-called Summer Refreshers subline.
On Honest Kids side, co has added Cherry Go Round and Twisted Tropical Tango flavors, while continuing to build brand as healthier alternative on foodservice side. After big coups last year in cracking Wendy's and Chik-fil-A, it's in Cinemark movie chain and is garnering traction from Merlin Entertainment's Legoland properties.
Asked to list her 3 priorities for the year, Ami said, first, to keep biz growing - to "deliver what's expected or all bets are off." Second, to maintain esprit of dispersed team. And 3d, to never lose sight of the honesty and transparency the brand stands for. "I absolutely love this brand, and what it stands for," she declared.
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07/18/2016
OBITS: Clement Pappas Co-Leader Dean Pappas Dies at Age 76; Elderflower Exhorter Cooper, Age 39
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First 365 Store Opens in 3 Weeks in LA with 18 More on Way; Operational Changes Encouraging As first of its streamlined 365-branded stores gets set to open in LA on May 25 (heralded by morning dance party the day before), Whole Foods has 19 locations signed up, with "many more" in negotiation currently, per co-ceo John Mackey. Mix includes 3 that are being converted from planned Whole Foods stores in Akron and Toledo, Ohio, and Bloomington, Ind. Those were 30K sq ft in size, better suited to 365 concept than conventional Whole Foods format, generally 45K sq ft or more. (Operations evp David Lannon reminded listeners that Silver Lake store in LA, at 28K sq ft, was originally slated to be conventional Whole Foods store before getting nod as inaugural 365 site.) Next 2 stores, opening in Q4, will be in Lake Oswego, Ore, and Bellevue, Wash.
Meanwhile, some operational tweaks are garnering results. Co is encouraged by results of centralizing buying and promo decision-making in Austin. In addition, WFM brass said tests in Mid-Atlantic and Austin of moving more inventory out to sales floor from backroom storage is producing "huge" results, cutting excess inventory, reducing shrink and improving employees' morale. Co is "planning on rolling this out as fast as we can across all the stores," one exec said. And test of move to central store kitchen in one store rather than in multiple spaces has eliminated redundancies and lessened capital burden, said evp operations Ken Meyer. So that's going to be expanded, too.
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face="Times New Roman">As Philadelphia City Council held first of 2 public budget meetings last night, there was large rally outside City Hall to protest Mayor Jim Kenney's proposed 3-cent sugared-drink tax. "Tractor trailers, many emblazoned with soda brand names on their sides, surrounded" building and brought traffic to a halt 2 hours before meeting, reported local NBC affiliate. They were joined by bev distribs, grocers and other groups fighting tax, per report. Speaking vs tax at meeting were Danny Vinas, owner of a CTOWN Supermarket, Danny Grace, biz mgr for Philadelphia Teamsters, and Miguel Martinez, head of Dominican Merchants Assn. Rally proved to be a "victory of sorts" for bev side as 3 city council members came out against tax, noted CBS. So while Mayor Kenney remains confident, he now needs to secure 9 of 14 other council members.
Both sides are kicking in big bucks as vote gets closer. Lobbying reports show American Beverage Assn has spent $1.5 mil so far, while coalition of groups fighting tax "has spent $2.6 million on airtime" so far, reported Philly.com. "We have and will continue to take steps necessary to inform Philadelphians about the truth of this grocery-tax proposal," said Anthony Campisi, spokesman for No Philly Grocery Tax Coalition. One local political operative who specializes in political ads wasn't so sure coalition's ad spend was wise choice. "It's spending a lot of money, given that fundamentally this isn't about persuading the people of Philadelphia," said J.J. Balaban, partner at Campaign Group. "It's about persuading the 17 members of City Council."
Big Political Guns Backing Tax It's no surprise that former NYC Mayor Michael Bloomberg has added undisclosed amount to coffers of pro-tax group Philadelphians for a Fair Future, which is launching $825K ad campaign today. "It's wonderful to have the support of a nationally respected business leader," said Mayor Kenney. "I'm hopeful these ads will correct the misinformation that the soda industry is spending millions to spread." Bloomberg joins Democrat presidential candidate Hillary Clinton in backing 3-cent tax. "I'm very supportive of the mayor's proposal to tax soda to get universal pre-school for kids," she said at appearance in Philly last month. Survey of 701 city residents, taken before ads were launched from either side, found 43% voiced "strong support" for tax while 29% "strongly opposed," noted Philly.com.
Both sides are kicking in big bucks as vote gets closer. Lobbying reports show American Beverage Assn has spent $1.5 mil so far, while coalition of groups fighting tax "has spent $2.6 million on airtime" so far, reported Philly.com. "We have and will continue to take steps necessary to inform Philadelphians about the truth of this grocery-tax proposal," said Anthony Campisi, spokesman for No Philly Grocery Tax Coalition. One local political operative who specializes in political ads wasn't so sure coalition's ad spend was wise choice. "It's spending a lot of money, given that fundamentally this isn't about persuading the people of Philadelphia," said J.J. Balaban, partner at Campaign Group. "It's about persuading the 17 members of City Council."
Big Political Guns Backing Tax It's no surprise that former NYC Mayor Michael Bloomberg has added undisclosed amount to coffers of pro-tax group Philadelphians for a Fair Future, which is launching $825K ad campaign today. "It's wonderful to have the support of a nationally respected business leader," said Mayor Kenney. "I'm hopeful these ads will correct the misinformation that the soda industry is spending millions to spread." Bloomberg joins Democrat presidential candidate Hillary Clinton in backing 3-cent tax. "I'm very supportive of the mayor's proposal to tax soda to get universal pre-school for kids," she said at appearance in Philly last month. Survey of 701 city residents, taken before ads were launched from either side, found 43% voiced "strong support" for tax while 29% "strongly opposed," noted Philly.com.
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As example of robust prospects for segment, Fowden cited order from unidentified retail customer that was initially foreseen as 700K-case biz but surged past 1 mil in first few weeks and now is expected to net out this year in 3-5 mil case range. That required $1 mil investment, with further outlays needed as additional lines are installed elsewhere in country, at hit to margins. But it continues glide path of sparkling waters to becoming dominant share of co's biz in coming years. With sparkling/waters now up to 27% of N America rev mix, that double-digit growth "is on a pretty meaningful base already," Fowden noted. He sees it leapfrogging CSDs in 2-3 years.
Recall that Cott, which is based in Toronto and Tampa, Fla, once was a nearly pure play in private-label bevs with a heavy emphasis on CSDs, but under Fowden in recent years has considerably diversified, both in bev segments it works and by acquiring home and office (HOD) water giant DS Services. For qtr, net revenue declined 1.6% to $698.4 mil but operating income, tho still slight, more than doubled to $14.7 mil. Net loss came in at $1.9 mil vs $1.2 mil loss a year earlier. DS Services sales increased 7.1% to $257 mil thanks in part to addition of recently acquired Canadian HOD player Aquaterra. N Amer revenues slipped 3.7% to $313.3 mil.
Big Bevcos Still Dealing on 2-Liters As private-label player, Cott is keenly attuned to big bevcos' promotional activities, which have immediate impact on sales. Tho Coke and Pepsi have been lauding their own efforts to refrain from category-killing discounting and steer consumers to higher-value packages, Fowden said that he sees no change whatsoever in one core CSD pack: 2-liter PET bottle. That pack "remains at $1 almost all the time" in large-format stores, he said. Over in UK, meanwhile, prices for branded energy and sports drinks continue to hit new lows, he lamented.
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Energy Gain Pace Slows on Red Bull Decline; Soft Pricing Energy drink volume increased 3.4% last 4 wks in all-channel stores, down from +4.6% for 12 wks, +7.3% for 52 wks. (Note: energy category also includes coffee & tea hybrid energy brands.) Pricing in segment was up just 0.4% last 4 wks. Monster Energy volume up 4.1% (vs +4.6% for 12 wks) on avg 2.2% price increase last 4 wks. Red Bull trends worsened from -0.8% decline for 12 wks to 3% drop last 4 wks. Avg prices were up 1%. Red Bull declines "were driven by lapping the launches and subsequent removals of several Editions lines," reminded Bonnie. Rockstar gained 10.5% (in line with its 12-wk gain pace) on flat pricing last 4 wks. PepsiCo (Amp, Kickstart) volume was up 5.9% on flat pricing last 4 wks. "Kickstart remains strong, albeit sequentially down (+14.2%)," reported Bonnie. Private-label energy brands slipped -0.2% on 11.4% avg price hike for 4 wks.
Sports Trends Flatten Out Sports drinks volume came in flat last 4 wks (down from +3.5% for 12 wks) on modest 0.5% avg price increase. PEP's Gatorade swung from 2.6% gain for 12 wks to 1.2% volume decline last 4 wks while pricing remained steady at +0.3%. KO's Powerade volume decelerated to 1.4% gain (vs +3.9% for 12 wks) with avg 2.7% price drop.
Water Volume Slows Even on Lower Prices Bottled water volume was up 6.7% (down from +8.7% for 12 wks) on avg 2.1% price drop last 4 wks. Private-label water brands continued to outperform: up 11% last 4 wks on avg 4% price decrease. Nestle volume gains decelerated to 2.1% (vs +2.8% for 12 wks) even as avg price cuts went deeper to -3.3% avg last 4 wks. Coca-Cola water volume slowed to 5.5% gain pace (vs +7.1% for 12 wks) on avg 1.4% price drop last 4 wks. PepsiCo water volume gain pace almost cut in half down to +5.8% last 4 wks as avg price decrease improved a bit to -2.4%.
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Announcement came on heels of 3d qtr report in which Lake Success, NY-based co reported 13% increase in net sales to $750 mil, +15% on constant-currency basis. With foreign exchange impact excluded, co returned to growth in US, rising nearly 3% to $352 mil despite such obstacles as accelerated decline in Celestial Seasonings teas after fumbled packaging change and hit to Sensible Portions as Walmart cut back displays as part of its broader Clean Floor initiative. Those 2 issues cost $6 mil in net sales and a point of additional growth.
It's undertaking # of other initiatives that resemble those of bigger bev siblings, including 3-year, $100 mil cost-reduction effort dubbed Project Terra, under guidance of newly elevated chief operations officer Jim Meier, and sku-reduction initiative echoing one just disclosed by PepsiCo. Co advised investors to expect plant closures, copacking realignment and other developments as it seeks to boost efficiencies among its scores of different brands playing in wide range of food, supplement and personal care categories. Among its own plants, bev operations are likely to take a hit after acquisition of Orchard House, with its own production capacity. On copacking side, Meier said Hain will cut back total # of partners, rebid key categories and identify joint purchases on ingredients and packages, among other aspects. Project Terra had been unveiled in early Nov as way of setting co on path to doing $5 bil in sales by 2020, with assistance from Boston Consulting Group.
Cultivate Ventures will start as grouping of brands doing $20-30 mil in annual sales, including likes of SunSpire chocolates, DeBoles pasta and Tilda ready-to-eat rice, fast-growing businesses that now will get "love, focus and attention." Cultivate also will serve as incubator for newly acquired brands and also serve as way to "invest in concepts, products and technology, which focus on health and wellness." Co promises further details down the road, perhaps on next earnings call in Aug. Co also has IDed some brands, not identified yet, as candidates for divestitures. Those brand collectively do about $30 mil in annual sales.
The new platforms include refrigerated Fresh Living group, $1 bil biz that includes poultry, yogurt, plant-based protein and other fresh items, including BluePrint bevs. As co does better cross-fertilizing its US and overseas brands, it expects to enter segment like cold soup, as well as enhance presence in kombucha by riding BluePrint brand. (Recall that at recent Natural Products Expo West, BluePrint gave peek at forthcoming entry, which presumably replaces unsuccessful entry marketed for years by Celestial Seasonings. BBI, Mar 8) Also in mix are Better-for-You Baby, Better-for-You Snacking (including Terra Chips), Better-for-You Pantry (including Celestial Seasonings teas) and Pure Personal Care.
Among other observations by Simon and his team, Amazon is now co's fastest-growing Top 10 customer & its #1 customer for baby segment, with Costco also scoring very strong year-on-year growth. Natural/specialty channel continues to be mixed bag, with Whole Foods struggling and Fairway filing for bankruptcy this week but Sprout's doing well. And echoing perils of price reduction strategies encountered by other brands such as Coke's Odwalla, execs acknowledged that passing along commodity cost reduction in Spectrum coconut oil in form of lower prices achieved only mixed response, as direct customers repriced brand immediately but those served thru distributors didn't. Co is hopeful that will get into alignment over next 90 days.
Hain Execs Philosophical on Celestial Seasonings' Coke Classic Moment You can't fault Hain for complacency on this one: eroding sales at Celestial Seasonings tea unit prompted extensive brand overhaul a year ago, with new packaging look, full-page FSIs and price cut. On this morning's conference call, HAIN brass acknowledged effort was a flop: consumers were confused and fled to other brands. So now they're going back to old look - Celestial Seasonings "classic," they called it, with echo of Coca-Cola retreat to Classic Coke after New Coke fiasco - and emphasizing emotional connection many users have had to brand as way to reclaim them. They didn't quantify how big the sale drop has been but NA Amer ceo John Carroll noted, "Just getting back to flat on teas is a big move on our growth," so it's been significant. Hain brass readily acknowledged comparison to New Coke and Pepsi's ill-advised Tropicana redesign of a few years back by way of reminding listeners that brands can recover from these missteps. Simon said marketing effort will remind consumers why they buy Celestial Seasonings, that there's only one Sleepy Time, one Red Zinger. Fortunately, despite woes, brand hasn't lost any significant retail distribution, "retailers did not give up on us." Co will be able to make a virtue of telling consumers, "Hey, we listened to you." Brand is still viewed as core biz, Hain brass emphasized.
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